Inherent Instability (when BerBanke got it wrong)

[alice wellintown]

In the world today, he says in “Antifragile,” “Black Swan effects are
necessarily increasing, as a result of complexity, interdependence
between parts, globalization and the beastly thing called ‘efficiency’
that makes people now sail too close to the wind.” So how to deal with
the dangers posed by this proliferation of uncertainty and volatility?

Mr. Taleb contends that we must learn how to make our public and
private lives (our political systems, our social policies, our
finances, etc.) not merely less vulnerable to randomness and chaos,
but actually “antifragile” — poised to benefit or take advantage of
stress, errors and change, the way, say, the mythological Hydra
generated two new heads, each time one was cut off.

In Mr. Taleb’s view, “We have been fragilizing the economy, our
health, political life, education, almost everything” by “suppressing
randomness and volatility,” much the way that “systematically
preventing forest fires from taking place ‘to be safe’ makes the big
one much worse.” In fact, he says, top-down efforts to eliminate
volatility (whether in the form of “neurotically overprotective
parents” or the former Fed chairman Alan Greenspan’s trying to smooth
out economic fluctuations by injecting cheap money into the system)
end up making things more fragile, not less. Overtreatment of illness
or physical problems, he suggests, can lead to medical error, much the
way that American support of dictatorial regimes “for the sake of
stability” abroad can lead to “chaos after a revolution.”



http://www.nytimes.com/2012/12/17/books/antifragile-by-nassim-nicholas-taleb.html?pagewanted=all&_r=0


On 7/18/13, Mark Kohut <markekohut at yahoo.com> wrote:
> Another inherent vice.......
>
>
> ________________________________
>  From: alice wellintown <alicewellintown at gmail.com>
> To: pynchon -l <pynchon-l at waste.org>
> Sent: Thursday, July 18, 2013 4:46 PM
> Subject: Inherent Instability (when BerBanke got it wrong)
>
>
> Mr. Bernanke wrote, “argued for the inherent instability of the
> financial system but in doing so have had to depart from the
> assumption of rational economic behavior.” In a footnote, he added, “I
> do not deny the possible importance of irrationality in economic life;
> however it seems that the best research strategy is to push the
> rationality postulate as far as it will go.”
>
> It seems to me that he had both Minsky and Kindleberger wrong. Their
> insight was that behavior that seems perfectly rational at the time
> can turn out to be destructive.
> http://www.nytimes.com/2013/07/19/business/economy/when-bernanke-got-it-wrong.html?pagewanted=all&_r=0